Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698941999502.pdf (South Africa)
Intergovernmental relations and the fiscal framework: coherence and meaning to the financial oversight role of Parliament in audit outcomes and public resource management 2 February 2022 REPUTATION PROMISE The Auditor-General of South Africa has a constitutional mandate and, as the supreme audit institution (SAI) of South Africa, exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.
To be recognised by all our stakeholders as a relevant supreme audit institution (SAI) that enhances public sector accountability.

MISSION VISION 2 WHO WE ENGAGE AGSA AGSA engages key stakeholders before, during and after audit process.

Stakeholders are given the opportunity to commit to remedial actions to improve their audit outcomes.
Minister Cogta/Finance MECs Salga Apac Mayors MMs CFOs Council speaker(s) MPACs Nampac 3 ROLE OF EXECUTIVE AUTHORITY (MINISTERS & MECS) • Prepare and initiate legislation and empower the implementation thereof • Develop and implement policy • Direct and coordinate the work of government departments • Perform other functions as called for by the Constitution or legislation • The MECs for Cogta in the provinces must report on the status of local government to the provincial legislatures; similarly, the minister of Cogta must report annually to Parliament on the state of local government 4 ROLE OF NCoP NCoP has the following role: • To hold national and provincial executive accountable on execution of their mandates • To approve and review national to province interventions – s100(1)(b) • To approve and review province to municipal interventions – s139(1)(b) • To resolve administrative capacity disputes within local government sphere – s125(4) The role of oversight is crucial in effecting change and enforcing consequence management 5 REFLECTION ON OUR MESSAGE • Despite our consistent warnings about deterioration of accountability in local government, we see little evidence of our messages receiving the earnest attention they require • This is demonstrated through the audit outcomes that show an overall regression over the period of this administration • We continue to see a deterioration in the financial health of municipalities and a lack of consequences • The poor state of financial and performance management indicates that our recommendations remain unheeded, in direct contrast to the concepts of public interest and accountability entrenched in our country’s Constitution and the legislation that governs local government MFMA Consolidated General Report 2019-20 6 THE VALUE OF AN AUDIT An audit report is an important enabler to support democracy – and includes information on: Annual financial statements How government has accounted for how it spent taxpayers’ money Compliance Whether processes followed were within the rules Performance information Whether the actual performance report is useful and whether the information reported can be relied upon We do not provide a full account of service delivery – however, a clean audit is an important building block towards sustained achievement and provides oversight with factual and accurate information on the reported performance of the auditee.
7 WHY WERE OUR POWERS EXTENDED AND WHAT DOES IT MEAN?

We have long reported on pervasive mismanagement/ leakage of public funds without consequences and our audit recommendations not receiving the required attention, with little or no improvement noted in the status quo, leading to our relevance being questioned.
Material irregularity means any non-compliance with, or contravention of, legislation, fraud, theft or a breach of a fiduciary duty identified during an audit performed under the Public Audit Act that resulted in or is likely to result in a material financial loss, the misuse or loss of a material public resource, or substantial harm to a public sector institution or the general public.
If AO/AA does not appropriately deal with MIs, our expanded mandate allows us to: 1 2 3 Refer material irregularities to relevant public bodies for further investigation Recommend actions to resolve material irregularities in audit report Take binding remedial action for failure to implement recommendations Issue certificate of debt for failure to implement remedial action if financial loss was involved 8 MUNICIPALITIES SUBJECTED TO AMENDED POWERS 9 NATURE OF IDENTIFIED MATERIAL IRREGULARITIES (MIs) Municipal manager notified of 96 MIs with estimated financial loss of R2,04 billion Disclaimers – 21 MIs Full and proper records not kept, as evidenced by repeat disclaimer opinions, resulting in substantial harm to municipalities (lack of service delivery and/or vulnerable financial position) Procurement and payments Non-compliance in procurement processes, resulting in overpricing of goods and services procured 1 MI – R2,5 million estimated loss Payment for goods or services not received or invalid salary payments 18 MIs – R285,9 million estimated loss Eskom, water boards, loans and suppliers not paid on time, resulting in interest 23 MIs – R979,3 million estimated loss Payroll and VAT returns not paid on time or incorrectly calculated, resulting in SARS interest and penalties 11 MIs – R54,7 million estimated loss Interest and penalties Revenue not billed 8 MIs – R182,3 million estimated loss Debt not recovered 2 MIs – R149,4 million estimated loss Revenue management Loss of investments 3 MIs – R264,9 million estimated loss Assets not safeguarded, resulting in loss 9 MIs – R116,6 million estimated loss Investments and assets 10 PREVENTATIVE CONTROLS: INFRASTRUCTURE DELIVERY PROCESS AGSA developed preventative control guides to: We developed 7 preventative control guides: • Guide 1: The importance of preventative controls • Guide 2: Tone and control culture • Guide 3: Institutionalises internal controls • Guide 4: procurement of goods and services • Guide 5: Preparation of financial statements • Guide 6: Asset management • Guide 7: Infrastructure delivery process (available since December 2021) 11 NCoP’s INTERFACE WITH SECTOR DEPARTMENTS NCoP Oversight conducted through approving interventions and monitoring progress s r o t c e S Minister of Health Minister of Basic Education Minister of Human Settlements Minister of Public Works MECs MECs MECs MECs Provide guidance and policy direction Monitor implementation of norms and standards Set targets in line with NDP Oversee infrastructure development Call ministers and MECs to account on expenditure and sector programmes 12 WHAT SHOULD OVERSIGHT DO?
Select committees to use information in audit report on material irregularities for accountability and oversight purposes, insisting on timeous implementation of recommendation by accounting officers NCoP to use reports tabled on progress with material irregularities to encourage public bodies to support with investigations NCoP to hold the MECs accountable on the progress and improvement on section 139 interventions Council to follow up on the actions taken against the official(s) responsible for transgressions Call minister, MECs to account on investigations into transgressions and irregularities conducted and affecting municipality Select committees, Councils, MPACs Call MECs to present progress on their local government support role including disclaimers Call audit committees to give assurance that risk assessment is conducted and to account on functional work of internal audit Call Mayor to provide update on what training and support is given to officials to enable them to correctly execute their responsibilities .
13 CHALLENGE TO NCoP AND OVERSIGHT IN GENERAL “Only a capable, efficient, ethical and development-oriented state can deliver on the commitment to improve the lives of the people of this country.” – President Cyril Ramaphosa • Ethical leadership, good governance and • Regular reporting on the interventions accountability • Encouraging stable administration – free from political interference • A strong control environment with strong internal controls that prevent financial loss • Consistent, appropriate and swift consequences for accountability failures NCoP should enable and insist on: in local government • Encourage significant oversight in monitoring senior officials, municipal leaders and councils roles • Effect consequences for accountability failures A call to action: what will change the tide in local government?
14 Stay in touch with the AGSA www.agsa.co.za Auditor-General of South Africa @AuditorGen_SA Auditor-General of South Africa